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Volume 611: debated on Tuesday 7 June 2016

6. What assessment he has made of the potential effect on the economy of the UK leaving the EU. (905193)

12. What assessment he has made of the potential effect of the UK leaving the EU on the economy of (a) Coventry and (b) the west midlands. (905199)

The projected rise in unemployment of 500,000 that I mentioned just now includes 24,000 people in Wales and 44,000 people in the west midlands. In the long term, the Treasury’s central estimate is that GDP would be lower by around £4,300 per household by 2030 than it would be otherwise.

The head of the World Trade Organisation said yesterday that the process of negotiating deals outside Europe would take decades. Is that not one of the reasons why confidence would be hit, currency would fall and jobs would be lost, including the 24,000 in Wales that the Minister has mentioned, and why companies such as Hitachi have mentioned today that they would pull out of the United Kingdom? Do we not agree on this one, Minister?

I think we do agree on the turmoil that uncertainty can bring, and the uncertainty about future trade deals that the right hon. Gentleman raises is part of that. There is much more uncertainty as well, of course, for businesses that currently trade with other European countries and people who are employed in those countries or might be thinking of going to them. All these things generate uncertainty, which creates economic turmoil in the short run. There is a real danger of missing out on a very large number of third-party trades in the long run, when all the EU trade deals currently under negotiation are finished, which will account for some 80% of our trade.

Can the Minister say what the economic benefits are of us being in the European Union, particularly in places such as Coventry and the west midlands, and more importantly what the impact on manufacturing is?

The automotive sector in the hon. Gentleman’s constituency and elsewhere is particularly important. It is a high value-added sector that has been a great British success story in recent years and it has complex cross-border supply chains, so it is unsurprising that those speaking out in favour of remain include the chief executives of Jaguar Land Rover and Rolls-Royce and the chairman of the Coventry and Warwickshire local enterprise partnership.

Considering that the UK has been a member of the EU for over 40 years and we still do not even have a trade deal with the United States of America, the largest economy in the world, does my hon. Friend not agree that our economy would benefit from the United Kingdom being able to negotiate our own free trade deals?

The businesses that I speak to say overwhelmingly that they feel they would get a better deal with the increased economic clout—five times the economic weight—that comes from being a member of the EU as opposed to Britain being on its own. All these trade deals take a long time, but when all the current EU negotiations are completed, the EU will have more trade deals with the rest of the world—so we will, too—than the United States and Canada combined.

The living wage is a very attractive economic policy, especially in eastern Europe. Given the extensive financial modelling that my hon. Friend has conducted, can he tell the House his official estimate of the number of unskilled migrants coming to this country from eastern Europe in the first five years after a vote to remain?

The national living wage makes sure that British workers who are low paid cannot be undercut by people coming from other countries. It will be of great benefit to our economy. It is also the case that as our legal minimum pay increases, we will still be within the middle range internationally.

Yesterday the Chancellor told the people of Northern Ireland that house prices would fall by 18% if we voted to leave the EU, even though the day before he said that housing costs would go up by 9%. He told us that 14,000 jobs would be lost in export industries, even though the exchange rate, which would help exports, was set to plummet, and made an uncanny prediction about incomes in 14 years’ time. Does the Minister not realise that the Chancellor is expending his own credibility and that of the Government, given the panic that has now set in, by trying to sell the threadbare economic case for remaining in the EU?

Saying that house prices would come down but housing costs would go up is not inconsistent at all, as the cost of borrowing would go up. Northern Ireland is a special case when it comes to the housing market, but in many parts of the country people might say that while it would be a good thing for house prices to come down, that should not be a result of crashing the economy and making it more difficult for people to borrow.

As for the long-term forecast, it is, of course, difficult to predict what will happen 15 years hence. What the Treasury analysis seeks to do is say, other things being equal, what will happen to the 15-year forecast whether we are in or out of the European Union, and the answer is clear: in the central scenario, GDP will be hit to the tune of £4,300 per household.

Does the Minister agree that, given that so many international firms—including, most recently, Hitachi—have made it very, very clear that being in the European Union and in a single market means that this is a good country in which to invest, the obvious thing to do for the purposes of investment and jobs is remain in the European Union?

I do agree with that. The United Kingdom has the third highest stock of foreign direct investment in the world, coming behind only the United States and China. We are the biggest recipient of foreign direct investment in the European Union, and also from the EU. The experience of accession countries shows that the move into the European Union really does make a difference, and that it is not just about tariffs, but about membership of a customs union. Some, indeed most, of the alternative models do not include that, but it is very important in relation to, for example, the cross-border supply chains about which the right hon. Member for Delyn (Mr Hanson) asked earlier.

Only two countries, Germany and the Netherlands, run a surplus with Britain; the rest run a deficit. Does the Minister agree that in the event of a Brexit, those other countries would vote for tariffs—as, indeed, would Germany, in order to stop Japanese car imports? Has he created a model to assess what impact those tariffs would have on employment levels in the short and medium terms, and on inward investment? I suggest that the impact would be disastrous.

Different countries will have different interests, and no doubt they would come to the surface during the two years of the article 50 negotiations. A very large majority of other countries using enhanced qualified majority voting would be needed to agree a deal. Fundamentally, however, I do not think that this is about the deficit that one country has with the EU, or vice versa; I think that it is about the relative size of the export market to that country. While 44% of our exports go to the EU, the EU figure is 8% in the other direction, which means that in any negotiation, the other side will have the better hand.

Can the Minister explain why we are paying more than £10 billion net this year for a £68 billion trade deficit with a declining part of the world’s economy, when anyone with even an ounce of common sense knows that it is possible to have a £68 billion trade deficit with a declining part of the world’s economy for nothing?

I think that I detected a revised figure in my hon. Friend’s assessment of our net contribution to the European Union. The fact is that for every pound that is paid in tax in this country, a little over a penny goes to the European Union. That is a cost—it is not a trivial cost, and I do not belittle it—but what comes with it are the trade benefits, the enhancement of our economy and the protection of jobs and investment that we want to see.